In today’s discussion, we explore a smart and strategic approach to achieving an expense-free lifestyle—investing in multi-family properties. This method involves living in one of the units while renting out the others, allowing you to offset or completely eliminate your living expenses.
Let’s delve into the details of this practical and achievable financial strategy.
The Multi-Family Property Advantage
The concept is straightforward but powerful: when you invest in a multi-family property, you gain the opportunity to live in one of the units while generating rental income from the others.
This strategy not only provides you with a place to live but also allows you to cover or even exceed your living expenses.
Calculating the Financials
Let’s break it down with an example. Suppose you purchase a multi-family property for $800,000, with a monthly mortgage cost of $4,000.
Your total monthly expenses, including utilities, taxes, insurance, and maintenance, amount to $5,000. However, when you rent out all three units, each unit brings in $2,000 in rental income, totaling $6,000.
If your expenses are $5,000 and your rental income is $6,000, you are left with a net surplus of $1,000 each month. This means that not only are your living expenses covered, but you also have an additional income while residing in one of the units.
The Hidden Benefits
Now, let’s consider the scenario where you decide to live in one of the units yourself. In this case, your rental income decreases to $4,000 ($2,000 per rented unit). However, your expenses still amount to $5,000.
At first glance, it may seem like you have an out-of-pocket expense of $1,000 per month.
Here’s where the hidden benefits come into play. When you have a mortgage, a portion of your monthly payment goes towards paying down the principal amount of your loan.
This means you are building equity in the property. Additionally, owning the property allows you to benefit from certain tax deductions.
By working with professionals like Certified Public Accountants (CPAs) and maintaining meticulous financial records, you may discover that the difference of a few thousand dollars is actually covered by these factors.
This can result in you living in the property almost entirely rent and expense-free.
Long-Term Benefits and Investment
Living in a multi-family property while renting out the other units not only provides immediate financial benefits but also offers long-term advantages.
For example, when you eventually sell the property, you may benefit from tax advantages, potentially paying less tax on the property’s income.
Moreover, if you decide to transition the property into a full-fledged investment property by selling it or renting out all units, you have the opportunity to generate additional income and further grow your real estate portfolio.
Conclusion
The strategy of living in a multi-family property while renting out other units offers a path to an expense-free lifestyle. This approach not only covers your living expenses but can also lead to financial gains through equity building and tax deductions.
If you’re interested in exploring multi-family property investments that align with your financial goals, Profitable Properties Boston is here to assist. Our team can help you make informed decisions and guide you toward achieving financial success, one property at a time.
